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The China Challenge

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Modified: April 24, 2014 at 4:42 pm •
Published: April 24, 2014

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In some ways, it already feels that we have arrived at this tipping point. I visisted Taiwan during its first democratic presidential election, in 1996, something China opposed because it implied that Taiwan was independent enough from the mainland to choose its own leaders. To show its anger, Beijing fired ballistic missiles that landed just inside Taiwan’s territorial waters. The crisis ended only when Washington sent two carrier battle groups to Taiwan. One wonders if the United States would do the same today; consider that on its maiden voyage in December and January, the Liaoning passed through the Straits of Taiwan. Would the U.S. risk a possible clash such as nearly happened in December?

Expensive military equipment like carrier groups raises deeper questions about a country’s underlying economic strengths. The United States spends almost as much on its military as the rest of the world combined. Its position seems unassailable. But while China is a distant second, its military spending is growing at a double-digit rate — indeed, in early March, the government announced that military spending would increase by 12.2 percent — and it is now firmly established as the only country capable of rivaling the U.S. in military expenditures. It also is unencumbered by what Dyer sees as wounds the United States has recently inflicted on itself:

“While the U.S. has been fighting a losing battle in Afghanistan for over a decade and poured more than a trillion dollars into the debacle in Iraq, China has been carefully conducting the biggest military expansion in the world.”

One wonders how much longer the United States can continue to support such an enormous military. Dyer is a Financial Times journalist and has something to say about each country’s economic fundamentals, but not as much as one might like. He is mostly — and correctly, I believe — dismissive of the argument that because China owns so much U.S. debt it can influence Washington’s policy. Indeed, as Dyer points out, China is trapped by all the treasury bonds it owns — like a bank that has lent almost all its money to one borrower, it is as tied to the debtor as the other way around.

But I would have liked to have read a bit more about how each country’s economic prospects will influence this growing rivalry. For that, I learned much from Stephen Roach’s book “Unbalanced: The Codependency of America and China.” Roach is a senior fellow at Yale University’s school of management and a former chief economist at Morgan Stanley, the investment bank, where he was one of the most influential writers on the Asian economy in the 1990s and 2000s. His book is a lucid and accessible primer on each country’s strengths, weaknesses, and prospects, highly recommendable to specialists and lay people alike.

Roach’s thesis is that both countries are unhealthily reliant on each other — he uses the analogy of an overly dependent couple, locked in an unstable condition of mutual need and hate. But he makes the case that the United States is in a worse long-term position than China. China exports too much, and relies too much on capital investment for growth. But its leaders clearly know this and are embarking on structural reforms that could slowly change its habits and allow for more domestically driven demand and innovation. The United States, according to Roach, “doesn’t seem to get it”; its political elite is primarily trying to resurrect the consumer-dependent growth of past decades.

The guts of Roach’s book are profiles of two pairs of policymakers: Alan Greenspan and Zhu Rongji, and Ben Bernanke and Wen Jiabao. In the first matchup, Roach says Zhu clearly wins. Greenspan helped to create one bubble after the other, while Zhu reformed China’s economy. Zhu did set China down the road of overreliance on exports, but he also undertook far-reaching reforms.

Of the second pairing, Roach is more ambivalent. Both men were good at analyzing their countries’ problems but less effective in engineering changes. Still, Roach sees Wen as setting the stage for the current round of reforms thanks to his forthright criticisms of China’s economic system. Bernanke, by contrast, has not effectively pushed for change, in Roach’s view. The comparisons might not be entirely fair because Bernanke and Greenspan were central bankers, not premiers of a one-party state, and thus didn’t have as much power as their Chinese counterparts. But Roach effectively uses them as symbols of their countries’ reform history.

Roach is not a defeatist. He says the United States has great strengths and could start exporting more — for example, to China, if China really does begin to consume more. But to do that, the United States must strengthen its hollowed-out industrial base and improve its institutions. Yet as he points out, the United States is losing its competitive advantage, slipping steadily in international comparisons. Shockingly to many Americans, the main culprits are basic requirements such as the country’s infrastructure, political system, health care, and primary education. This leads Roach to conclude that the historian Paul Kennedy has it right: The United States is in decline because of "the imbalance between America’s unparalleled projection of its vast military power and the erosion of its domestic economic base.”

This isn’t to say that there aren’t severe dysfunctionalities in China. The key underlying issue is of course political reform. This term is widely used in China, but primarily means bureaucratic streamlining or improved administrative responsiveness to citizen complaints.

One could argue that human rights don’t matter to China’s rise — that these are domestic issues that won’t affect expansion abroad. And yet China’s narrow political system is clearly one reason for its neighbors’ suspicions. If the government continues to lock up moderates then many abroad will wonder if China is the sort of country that can make a long-term stable friend.

The most recent case was the conviction of rights activist Xu Zhiyong. In late January, he was sentenced to four years in prison on charges of “gathering a crowd to disturb public order,” stemming from his work to organize the New Citizens Movement. That group, entirely peaceful in its activities, aimed for reforms to the existing system to combat corruption and promote a fairer education system, especially for disadvantaged rural children. The two demands are largely in line with priorities of Communist Party leader Xi Jinping, and Xu was widely seen in dissident circles as a moderate. Harshness like this at home won’t prevent China from cutting resource deals — China has money, and these goods are for sale — but it will make it hard for any developed (and, by extension, democratic) country to treat China like a true long-term partner.

This theme is picked up with gusto in David Shambaugh’s “China Goes Global: The Partial Power.” Shambaugh is one of the most influential analysts of China-U.S. relations. His book shows the flip side of China’s military rise: its inability to use its new power to influence the world. It’s a wide-ranging, impressive work, reflecting Shambaugh’s decades of research and far-ranging contacts in Chinese policymaking circles. His book makes use of interviews not only in China but in Europe and other countries, affording him a 360-degree view of China’s rise.

What Shambaugh makes clear is that for all the bluster, China actually accomplishes little diplomatically. Except for events directly affecting its territory, it stays on the sidelines of most international conflicts, never shaping outcomes. Instead, its main foreign policy tool seems to be the ritualized state visit by foreign dignitaries.

In one of my favorite sections of the book, Shambaugh describes how these visits play out. The foreigner always visits the same few places: Tiananmen Square, the Great Hall of the People, the Diaoyutai Guest House and the Zhongnanhai leadership compound. At one of the latter two locations a bizarre meeting takes place. The Chinese leader is kept out of sight in a room behind a door. He is always standing. The foreigner is then let in from an antechamber. This forces the foreigner to walk up to the Chinese leader. The foreign guest arrives on the Chinese leader’s right side and the two stand facing the cameras. Then they shake hands, still facing the cameras.

The foreigner’s location on the right is important because the foreigner has to reach awkwardly across his body to shake hands with the leader, while the Chinese leader only has to extend his right hand slightly. “As a result, the Chinese leader always appears relaxed and confident, whereas the foreigner often seems physically uncomfortable.” These theatrics, of course, are for domestic consumption. But they also reflect a telling lack of substance in Chinese diplomacy and an overreliance on showmanship. They might also say something about the need for an aircraft carrier and to defend it with theatrical gestures — a desire to measure up and surpass one’s opponents. In some ways such concerns to make a visible effect recall the great early 20th-century Chinese author Lu Xun and his berating of Chinese for “spiritual victories.”

Another example is China’s love of slogans. At home, it regularly bombards citizens with slogans like “harmonious society” or “China dream.” Abroad, it has used equally empty slogans over the past 15 years, throwing out terms such as “new international order,” “new security concept,” “China’s peaceful development road,” “China’s peaceful rise,” “strategic partnership,” “peaceful development” and “harmonious world.” Foreigners are expected to acknowledge these slogans, a practice known as biaotai, or “to declare where one stands.” But as Shambaugh points out, this is simply parroting slogans back to China, not a meaningful discussion.

Digging deeper into these practices, Shambaugh sees a crisis of national identity. He has a telling interview with Men Honghua of the Central Party School. Men said China had great, universal values but they were destroyed in the Cultural Revolution:

“We have lost our values — we do not have any common values at all. There is a vacuum of values in China. Nor do we have an ideology.”

The deep structure of Chinese politics and society is also captured in “China Story Yearbook 2013: Civilising China,” a compilation of essays edited by the Australian Sinologist Geremie Barmé and the Beijing-based writer Jeremy Goldkorn. This is the second year that they have published this valuable look at the past year, which is available free as a download. The “Yearbook” has a summary of recent events with short, punchy essays by up-and-coming writers such as Leta Hong Fincher on women, Benjamin Penny on social role models, and Sebastian Veg on nationalism. Goldkorn also has written a valuable chapter on the government’s efforts to “civilize” (i.e., control) the Internet.

Barmé's chapter on the Communist Party’s values is especially noteworthy. He points out the Party’s central contradiction. On the one hand, it explicitly rejects what it calls “universal values,” declaring that Chinese socialism has served China well:

“Such triumphalism masks the fact that there is an abiding clash of cultures within the Chinese Communist Party itself. Its strict materialist worldview precludes any endorsement of abstract human worth and universal value. But, rhetorically at least, it recognizes the potentially positive role of values that, like Marxism itself, first evolved in the West.”

After reading these books I was persuaded by Dyer that the U.S. faces a serious challenge. I also thought that Shambaugh’s discussion on soft power was especially convincing. Part of being a hegemon is having an attractive culture that others seek to emulate, and China doesn’t seem to have this (despite a fascinating history and traditional culture).

But I kept thinking back to Roach’s book. Being clever and having soft power are fine but they have to be underpinned by serious economic policy and a sustainable fiscal system. More importantly, they have to be backed by a populace and political elite that believe in its system. If the United States continues to disregard these basics, China may not need a Mahan-like program of building warships; its rise might simply be by default.

(Ian Johnson is a Beijing-based correspondent for The New York Times. He won a Pulitzer Prize for his coverage of China and is writing a book on China’s search for values.)

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